By Naveed Kashif
Naveed Kashif, director of corporate services at Biznet Consulting, explains that establishing a strong legal structure is crucial for young businesses in the UAE, allowing them to protect their investment and intellectual property in business
It did not happen, if it is not documented. This saying absolutely fits in the context of business. You can have great ideas, innovative plans, an excellent team to work with but all these things together cannot turn a start-up into a successful venture until the proper documentation and records are in place.
A solid legal structure plays an essential role in protecting the interests of the business and business owners over the course of a company’s lifetime. Take a look at these seven legal documents that every start-up must have to avoid high expenses while growing their business in the United Arab Emirates.
A trade licence is like a birth certificate of a company. It confirms the company’s admission to the corporate world.
All UAE mainland commercial companies have a “commercial licence” which consists of three pages. The first page is a “commercial license” which shows the company’s legal name, legal type, issue and expiry date, licence number, registration number, company address, contact details, the company’s manager and business activities. The second page is a “partner page” which shows the partners’ names, their nationalities and their share percentage. The third page is a “commercial registrar” page, containing information about the capital of the company, in addition to all the elements of first page.
All professional companies have a one-page trade licence which includes similar information as a commercial licence. If the partners are also partners in professional companies, the trade license will have the “partner page” as well.
All UAE free zone companies have a “trade licence” or “certificate of incorporation”. The licence is normally issued for one year and renewable every year. However, in certain conditions, it is valid for two years.
By-laws are the most important legal document of any company. By-laws define how a company will govern itself. These documents establish the duties and responsibilities of key members of the organisation, including the board of directors.
Bylaws also have detailed descriptions about how they can be amended, who can recommend amendments, and how these amendments will be voted upon. As a whole, they spell out your business’ structure, individual roles, and governance issues.
In the context of UAE mainland commercial companies (LLC), by-laws include a memorandum of association (MOA) while in the case of a professional licence they must have a local service agent agreement (LSA). In free zone jurisdictions, by-laws must include a memorandum of association (MOA) and an article of association (AOA).
Establishment cards are another set of important documents to start and operate a business entity in the UAE. Every company, regardless of whether it is a mainland or a free zone company, is required to obtain an immigration establishment card.
To obtain this card, the company has to register with the General Directorate of Residency and Foreigners Affairs. This card will enable a company to obtain visa approvals for the expat staff they recruit. You cannot apply for visa of your employees if you do not possess this card. The card is renewable and it is valid for three years for mainland companies and one year for free zone companies.
Establishment Card (Ministry of Labour)
Only mainland companies are required to obtain a labour establishment card. This card enables the company to get workforce approvals from the Ministry of Labour, which is called the “electronic quota.” As the name suggests, the application process is done electronically.
The appointment of foreign nationals in a private firm operating in the UAE are dependent on the quota given to the company by the Ministry of Labour.
This quota limits total number of staff (foreign nationals) an entity can sponsor. The quotas are based upon the nature of business, the legal structure of company, and the size of the employer’s premises. This card is issued for the lifetime of the company and is not renewable.
In the competitive business scenario, you need to protect the privacy of your business secrets, such as customer lists, pricing plans, and the like. A non-disclosure agreement acts as a protective shield for exclusive information related to your business.
This legal document creates a confidential relationship between your business and any of your contractors, employees and other business partners.
The purpose of the agreement is to allow the holder of confidential information, such as an idea about a new product, to share it with third party with the condition that the third party is obliged to keep the information confidential.
Employee contracts and offer letters
A strong employee contract or offer acceptance letter to employees ensures that the employee has tied a knot with your company. This contract is signed and registered with the Ministry of Labour. The terms of employment, who they report to, ownership of work, expectations, required commitments should be mention clearly in the contract. This will minimise the chances of future disputes. If you want to dissuade new hire from leaving your company too soon or going to work at a competitor, you can add a special condition in the contract letter.
Trademark registration certificates
Many start-up founders do not pay enough attention to trademark protection. People mostly believe that registering a business or a company name gives them the ownership of that trademark as well. This is not true.
You have to apply for a trademark registration certificate at the Trademark Office of the Ministry of Economy in order to get exclusive rights on the trademark or the name of the company.
The registration process, which can be initiated immediately after or even before registering the company, may take 8 to 12 months.
After registration the owner automatically gets exclusive rights on that particular trademark to use it in all seven states of the UAE.
If you ignore this process and any other party starts using the same name or the similar trademark, it can create confusion among your clients and also cause possible infringement of your intellectual property rights.
Trademark registration is an easy way to prevent the use of the same trademark by any other party.
Will (testament) protection of assets
Protection of assets is very important for expat business owners. To protect your assets, it is advisable to make a will (testament).
The will (testament) should be documented in compliance with both the UAE laws and the laws of your home country. You can get advice on this issue from any expert will lawyer.
This testament will protect your assets and businesses and, in case of any dispute, your assets will not be treated according to Sharia law.